Commercial finance guide
Asset refinance explained for UK businesses
Understand asset refinance, valuation, settlement figures, costs and risks when considering value tied up in business vehicles, plant or machinery.
NBS Finance is a commercial finance broker and introducer, not a lender. Finance is subject to status, provider assessment and terms. An introduction does not guarantee an offer of finance.
Direct answer
Asset refinance is a new finance arrangement supported by value in an existing business asset, such as a commercial vehicle, item of plant or machine. The provider assesses ownership, current finance, value, useful life, the business and the reason for the funds.
Refinance can release working capital or replace an existing agreement, but it can also extend borrowing, increase total cost and place an owned asset under provider security.
How refinance differs from a new purchase
New-purchase finance funds an asset being acquired from a seller. Asset refinance starts with an asset the business already owns or is already financing. That means ownership evidence, settlement figures and current valuation are central to the assessment.
Scenario 1: an asset owned outright
The business must show that it owns the asset and that no undisclosed lender or other party has rights over it. The provider may inspect and value the asset. If the agreement completes, the asset becomes subject to the new finance arrangement and related security or ownership rights.
Scenario 2: an asset with finance outstanding
The current provider supplies a settlement figure. A proposed new provider considers the asset value, amount needed to settle the old agreement, additional funds requested and affordability of the new arrangement.
If asset value does not sufficiently exceed the settlement and costs, the proposal may not raise the amount sought—or may not proceed.
Valuation is not the original price
Providers may use current trade, wholesale or forced-sale evidence rather than original purchase cost or a retail asking price. Relevant factors include:
- make, model and identifier;
- age, condition, mileage or hours;
- maintenance history;
- modifications;
- location and ability to inspect;
- market demand;
- expected useful life; and
- any existing security or title issue.
A specialist valuation may be required. The cost and who pays it should be clarified.
What can refinance be used for?
Subject to provider criteria, a business may consider it to support:
- working capital;
- a deposit or purchase;
- contract mobilisation;
- a seasonal or timing gap; or
- replacement and restructuring of an existing asset agreement.
The intended use should be stated honestly. Refinance is unlikely to be a sound solution if it merely delays an unresolved inability to meet liabilities.
The amount available
There is no universal percentage. The amount depends on valuation, outstanding balances, provider policy, requested term, business risk and affordability. Fees or retained margins may reduce net proceeds.
Avoid planning expenditure around an estimated asset value before receiving and understanding a provider’s written offer.
Costs and risks
Review:
- interest or finance charges;
- arrangement, documentation, valuation and settlement fees;
- total amount payable;
- term and payment dates;
- early-settlement and termination terms;
- personal guarantees or other security;
- ownership and insurance obligations; and
- consequences of missed payments, including possible recovery of the asset.
A longer term can reduce an individual payment while increasing total repayment. An owned asset that was free of finance becomes subject to contractual rights in favour of the provider.
Practical example — owned plant
Hypothetical example, not a customer case or indication of approval: A plant-hire business owns three machines outright and wants funds for seasonal working capital. It prepares an asset schedule with serial numbers, age, hours, condition, purchase evidence, photographs and maintenance history, plus accounts, bank statements and an explanation of the cash-flow need.
A provider may inspect the assets, apply its own valuation and offer less than the business expects. The business should compare the net proceeds and total repayment with alternatives.
Practical example — vehicle with an existing agreement
Hypothetical example, not a customer case or indication of approval: A logistics company wants to review finance on an existing truck. It obtains a current settlement letter and provides the agreement, registration, mileage, service record, current value evidence and recent financial information.
The provider assesses whether a new agreement can settle the old one and whether any additional amount and new payment profile are affordable. A lower periodic payment is not guaranteed and may result from a longer term.
Documents to prepare
- asset schedule and location;
- registrations or serial numbers;
- purchase invoices or title evidence;
- finance agreements and current settlement figures;
- photographs, service history and valuation evidence;
- accounts and management information;
- bank statements;
- existing borrowing schedule;
- amount requested and purpose; and
- identity and business ownership information.
When to seek other advice
Speak with an accountant about cash-flow impact and accounting or tax treatment. Seek legal advice if ownership, charges or contract terms are unclear. If the business is struggling to pay debts as they fall due, consider qualified insolvency advice before using an essential asset to raise further borrowing.
NBS Finance does not provide legal, tax, accounting or insolvency advice.
Questions to consider
- Is the asset essential to day-to-day trading?
- Is ownership clear and is any settlement up to date?
- What net amount will the business receive after settlement and fees?
- What is the total amount payable?
- Will the proposed term exceed the asset’s useful life?
- What security or guarantee is required?
- What happens if payments cannot be maintained?
- Does the expected business benefit justify the cost and risk?
Related service and next step
Explore asset finance for a new purchase
Start with the ownership and settlement position
List the assets, current finance and amount required. Mark estimates clearly.
Use the guide to prepare your enquiry
Bring together the documents and questions relevant to the route, then tell NBS Finance what the business needs to fund.